When purchasing a commercial property, there are several considerations to be made. This includes more than simply whether the property is within your budget or your preferred location.
When searching, it is easy to become overwhelmed and, as a result, hinder your business’ situation regarding clientele and future development opportunities.
At Bowsers Solicitors, our experienced commercial property team have worked closely with several business owners, landlords and tenants over the years. Drawing on our decades of experience, our team has created a guide that ensures you consider all the essential aspects of selecting a commercial property that works for you.
You may find that whilst searching for your ideal commercial property, you are forced to sacrifice location for budget, or vice versa.
It is essential to select a conveniently located property for employees, clients and suppliers. However, if you do not require premises that are easily accessible to members of the public, for example, you may be able to save money by leasing or purchasing a property in a more rural area.
Consider Cash Flow
It is never advisable to overspend when buying or renting a commercial property. Should your business do so, you risk that, if you require a ‘cash injection’ at a later date, you risk having insufficient disposable finance.
When purchasing, mortgage lenders typically request a deposit of 20% of the property’s value. When renting, less initial investment is required. However, in addition to the rent, you will likely also be liable to pay rent insurance and service charges in addition to an initial deposit to the landlord.
In both cases, whether renting or buying, you may also incur the cost of Stamp Duty Land Tax.
Whilst a purchase or rental price may be within your budget, you should also make financial provisions for any furnishings, fittings, development, machinery, upkeep and ongoing costs.
Lease or Purchase: What should I do?
This question has no straightforward answer, as it greatly depends on your circumstances.
For small businesses, it is typically sensible to enter a lease for short-term flexibility. In addition, it may be suitable to negotiate a tenant’s right to break the lease before the term end date. Short leases can provide great flexibility, which can prove beneficial for small businesses looking to restructure or upsize.
Furthermore, for short-term leases, the rent value may be below the Stamp Duty Land Tax (SDLT) threshold, incurring savings for the business.
However, long-term leases can offer security and opportunity for larger companies. Longer-term leases may allow a company to personalise their premises in relation to its business needs. Before doing so, it is essential to review the terms of their lease to check for any preventative clauses.
In some cases, for well-established businesses, buying a commercial property may be the best option. This allows them to adapt the property to the business’s exact needs without the concern of a landlord’s input.
Purchasing a commercial property means that the company will typically remain there for an extended period, so in doing so, the future sale price of the property should be considered as making a profit would be favourable should you decide to sell in the future.
Commercial Property Solicitors Cambridgeshire
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